(Update, 10/18/2010: A revised version of the second half of this post appears as an article in Capitalism Magazine, dated October 3, 2010: The Philosophical Absurdity Underlying Stimulus Spending)
Here is some elaboration on this statement from my previous post, in which I wrote that Obama’s statement at his “Job’s Forum” could be boiled down to this: Tell me what to tell you to tell people to do.
Obama was asking for advice on what to do on the economy. But the only proper role of government in the economy is the protection of property rights as part of protection of life and liberty. Any government action beyond this role amounts to using coercion to tell people what they must do with their lives. And so Obama is asking people to tell him what to tell people to do.
Furthermore, Obama was asking specifically for help from businessmen in creating jobs. In creating a job for someone, a businessman gives someone instructions on what to do in order to be productive; in short, the businessman tells someone what to do. And so Obama is asking people to tell him what to tell them to tell people to do.
(Note that a prospective employee too can create a job, when the prospective employee explains to a prospective employer how the employee can make money for the employer.)
But, one may, ask, why is Obama’s plea so wrong?
For one thing, it is not the job of businessmen to create jobs for others, as it is not the job of American citizens to create profits for businessmen. Republicans are as wrong as Democrats on this issue. As I wrote last February,
To the Republicans, like the Democrats, the job of productive geniuses is to provide jobs for everyone else. The idea of the welfare state has reached a deeper level. According to this idea, the “people” must be provided not only with products and services such as food, shelter, and health care, but they must also be provided with a job so that they can hold the illusion that they are earning their living.
A businessman rightfully tries to produce at the lowest cost possible, which generally means with the lowest number of jobs possible. A good businessman tries constantly to reduce the number of jobs needed to produce a given supply of goods, just as any person tries constantly to reduce the number of hours needed to complete his household chores. Often, of course, a prosperous business needs to create more jobs in order to produce and sell more goods that its customers are demanding. But even in these cases, “job creation” is not the business’s goal but rather an unavoidable cost; the business’s goal is profit. And a business may also prosper not by increasing production at all but instead by cutting costs by cutting jobs. These facts are such simple common sense that it is unconscionable for any politician or commentator to speak of “job creation” as a proper goal of business. Yet politicians and commentators speak this way almost unanimously.
Another, worse thing wrong with Obama’s plea can be seen by observing the difference between mutual consent and coercion, analogous to the difference between consensual sex and rape. A businessman is free to create a job or not, and offers some of his own wealth as payment for the job. When the government “creates” a job, the government offers wealth that was robbed (through taxation) or stolen (through deficit spending and ‘monetizing’ its debt) as payment for the job.
The ongoing public debate, between Democrats and Republicans, over whether the government really has saved or created the jobs that it claims to have saved or created, is a false alternative. Any job “saved” or “created” by government—apart from the job of protecting the life, liberty, and property of its citizens—should not exist.
Some might protest that the government’s creation of jobs is not at all like rape; after all, no one is forced to accept a government job. But citizens are forced to turn over their wealth. And suppose the government said this to you: “We are taking your husband away from you. But don’t worry, the government will provide another man for you. Now, we are not forcing you to take this man; but if you want a man, this is the man you can have. But no one is raping you.”
The wealth robbed or stolen from private citizens and then spent on a government job is wealth that cannot be spent or invested by the rightful owners of that wealth.
What if you cannot find a job in a free society? Well, what if you cannot find a man (or a woman)? You keep trying, or you do your best on your own. You don’t resort to rape or to kidnapping another woman’s man for a chance at that woman.
The average rental price for cropland in New York State in 2009 was $41 per acre, per year. That means that for $400 per year, or roughly a couple of months of saved-up food stamps, a man could rent more than enough land to subsist on and possibly even support a small family—even without expensive modern equipment—through his own hard work. (Families in China today subsist on less than an acre per person.)
One failing of modern education is that most people today have no inkling of how to survive on their own. They have no idea of how to grow food or hunt or raise livestock, how to build or maintain a shelter, how to make or even mend clothing. More importantly, they somehow feel unable to learn how to do these things, things that even primitive savages somehow learned how to do. Most importantly, they have no appreciation for those who do know how to do these things, and who offer their goods and services to them. Today’s ignoramuses condemn landlords, but demand the shelters that these landlords build and maintain; they condemn energy companies, but demand the fuel and electricity these companies provide to heat their homes, fuel their cars, and run their appliances; they condemn drug companies and insurance companies, but demand the drugs and insurance that these companies create. More generally, they condemn businessmen, but demand that businessmen provide them with a job, as if to say, “We don’t know how to survive on our own. Somehow you do know how to survive; you must be privileged or something. Tell us what we must do in order to be useful. And then drop dead.”
The model product of modern education is Barack Obama.
When the financial crisis hit in late 2008, individuals realized that their savings—especially their stocks and their homes—were not as valuable as these individuals had thought. These individuals then acted rationally: they cut back on their spending. They refrained from buying things that they did not need: things such as vacation trips, dinners in restaurants, home entertainment centers, and new automobiles. They cut back on these luxuries in order to rebuild their savings for things that were more important to them: things such as education for their children; or a nest egg for a rainy day; or a nest egg for their retirement, when they would need savings in order to pay for food, shelter, clothing, and health care.
Businesses that offered the unneeded goods and services suffered. The government’s “stimulus plan” was designed (at least ostensibly) to spend government money—acquired through borrowing on behalf of taxpayers—on these suffering businesses so that the employees of these businesses could keep their jobs. And the employees’ jobs consisted of continuing to produce things that rational individuals had decided they did not need.
And so, while rational individuals thought that they were replenishing their savings by cutting back on luxuries, the government has been surreptitiously spending these replenished savings in order to keep producing what the savers do not need. The savers believe that their saved dollars can be redeemed in the future to buy the food and health care they will need. But instead, these savings will have to be spent on paying back the debt that the government incurred when the government kept people working at making unneeded things. Just as in late 2008, only more so, the savers’ savings today are not worth as much as the savers think.
One might ask: “But what if the government defaults on its debt?” (Such a scenario is very likely, since ‘monetizing’ the debt—creating more dollars and paying the debt with them—is one, devious way of defaulting.) Then, won’t the savers be off the hook and not have to pay off the debt? Well, but there are many savers who have put some of their savings into government bonds. Many savers have done so without even realizing it, since the companies in which they own stock have done so. If the government defaults on its debt, then the savers who own bonds have less savings than they think they have. However you slice it, many, many Americans today have much less wealth than they think they have.
One day, there will not be enough real savings—that is, real capital equipment and fuel and supplies—remaining, and factories and mechanized farms will no longer be able to run, and prosperity will end.
As people, even ‘wealthy’ people, die for lack of drugs or medical equipment or trained doctors, the last factories to go dark will be the government-subsidized ones making fancy new automobiles and home theatre centers.
Why is our government taking us down this suicidal path? One of the government’s arguments is economic. Here is Obama on April 14, 2009:
To begin with, economists on both the left and the right agree that the last thing a government should do in the middle of a recession is to cut back on spending. [This false statement would have been true if, for “on both the left and the right,” Obama had substituted “among both hard-core Marxists and semi-socialist Keynesians.”] You see, when this recession began, many families sat around the kitchen table and tried to figure out where they could cut back. And so have many businesses. And this is a completely reasonable and understandable reaction. But if everybody—if everybody—if every family in America, if every business in America cuts back all at once, then no one is spending any money, which means there are no customers, which means there are more layoffs, which means the economy gets even worse. That’s why the government has to step in and temporarily boost spending in order to stimulate demand. That’s exactly what we’re doing right now.
But people don’t stop spending altogether. They stop spending on things they don’t need. Yes, there are layoffs; there are layoffs of people who are making things that customers don’t need. People stop buying today what they don’t need so that in the future they will be able to buy what they do need. Likewise, in a free society, people stop making what customers don’t need so that they can begin to make what customers do need.
The process of transitioning from the production of unneeded things to the production of needed things takes time, but the process must be allowed to start. The time that managers and laborers continue to spend on making home theatre centers is time that they cannot spend on learning to be doctors’ assistants or to make medical supplies. The money that an investor gives to government to buy a ‘safe’ Treasury bond (used to keep an auto company going) is money that he won’t invest in building a new facility to train nurses.
A favorite argument for stimulus spending is an argument from Keynes, alluded to by Obama in his passage above. In an economic recession, according to Keynes, there are idle resources. Factories are operating at under full capacity, and people are unemployed. According to Keynes, if the government can somehow coax the economy to put those idle people and machines to work, then extra wealth will be created at no cost. According to this argument, such government spending does not ‘crowd out’ private investment; the resources paid for by government spending are not being taken away from some private use, because these resources had been idle anyway.
The basic error of this argument is the basic error of Marxism: the denial of thought. Marx was a (‘dialectical’) materialist. To Marx, the means of production are machines, arms, and legs, but not minds. Working entails sitting or standing at a machine and pulling levers, or swinging hammers. To materialists such as Marx and Keynes, thinking—about what to make and how to build new machines to make those things—does not count as work. ‘Worker’ is synonymous with ‘manual laborer’.
In a free society, free individuals may choose to let their obsolete machines idle, but their minds do not idle. A laid-off laborer lives off of his savings (which he did not squander on HDTVs and a new SUV and trips to Vegas) while he teaches himself a new skill. A manager who made cars starts planning to make ambulances. And so on. But again, individuals cannot do this new teaching and planning while they are still doing the old ‘working’.
The irony of Keynesianism is that, in the act of trying to achieve ‘full employment’ and ‘full capacity utilization’ of existing machines, it achieves the complete idling of the one truly precious resource: the human mind.
What if the government had not bailed out auto companies and banks, and had not ‘saved’ other jobs through the stimulus plan? Many people would have lost jobs. Those with inadequate savings would have had to cut back on expenses drastically. And that would have been a good thing. The stimulus saved these people from even having to think of ways that they should have cut back. For instance, not only would they have had to cut out SUVs and cell phones and plasma TVs and cable TV and beer and football, but they might have had to move in with their parents or their neighbors, and live two or three families in a one-family house. The former factory worker might have had to become a handyman hustling jobs from the whole neighborhood, working 80 hours a week instead of his usual 40, while studying another 10 hours a week to be a paramedic, and thinking another 10 hours a week about a new idea for low-cost mobile offices for doctors. The children might have had to do all the household chores while their mother worked 80 hours a week helping out in the emergency room and learning to become a nurse. And all of these things would have been good.
But by ‘saving’ the jobs of these ‘workers’, the government ‘saved’ these individuals from the responsibility—and the rewards—of thinking.
It is difficult to say who are the most harmed by the government’s ‘jobs stimulus’: those of us who have to pay for these obsolete jobs, or those who remain in them.
The above is a partial elaboration of my One-Sentence Memo on ‘Stimulus’ Spending, which I wrote last February:
Government spending enables some people to acquire what they have not earned, deceives other people into thinking they can afford to buy what they don’t really need, and stimulates people to work at making things that people have not earned or don’t need.
So there we have the economic argument for the government’s job stimulus, and my rebuttal. The economic argument does have to be rebutted, but remember this: The only reason that Keynesianism, an absurd doctrine, has influence is that it is a rationalization for statism. And the politics of statism rests on the moral code of altruism, which has been expressed by Obama, for instance, in two of his ready slogans: “We are our brother’s keeper” and “shared sacrifice and shared prosperity.”
Fortunately for mankind, the ethics of altruism has been refuted by Ayn Rand, the champion of rational selfishness. If only more of mankind would discover that fact.
I came here to say that I do not recognize anyone’s right to one minute of my life. Nor to any part of my energy. Nor to any achievement of mine. No matter who makes the claim, how large their number or how great their need.
I wished to come here and say that I am a man who does not exist for others.
It had to be said. The world is perishing from an orgy of self-sacrificing.
[Howard Roark in The Fountainhead, by Ayn Rand, 1943.]